Negotiation 101
April 20, 2011 11:10 AM Subscribe
Here's what I don't understand about negotiation: why it's good to go last.
Everything I read or am told (or see on Pawn Stars) about negotiation says that you want "the other party" to state their number first. But everything I read and observe about sales, fundraising, etc. says that you want to set the context. Like how stores put the expensive shoes in the front, or fundraisers who ask for much more than they expect to get.
So why isn't it a good idea, when I'm trying to negotiate something, for me to set the context instead of asking the other party to do it?
Everything I read or am told (or see on Pawn Stars) about negotiation says that you want "the other party" to state their number first. But everything I read and observe about sales, fundraising, etc. says that you want to set the context. Like how stores put the expensive shoes in the front, or fundraisers who ask for much more than they expect to get.
So why isn't it a good idea, when I'm trying to negotiate something, for me to set the context instead of asking the other party to do it?
It depends on your strengths and who holds the perceived "upper hand". A pawn broker isn't under any obligation to buy anything but the customer more often than not needs to get some cash. It is in the broker's interest to get an idea of how desperate the customer is by their offer.
posted by JJ86 at 11:14 AM on April 20, 2011
posted by JJ86 at 11:14 AM on April 20, 2011
Because if you go first, you might suggest a number that is too low if you're selling.
Think about it, say you've applied for a job and they ask you about your salary expectations. What if you say a number far below what they were initially going to pay? You've effectively set the bar low and lost yourself money.
posted by inturnaround at 11:15 AM on April 20, 2011 [1 favorite]
Think about it, say you've applied for a job and they ask you about your salary expectations. What if you say a number far below what they were initially going to pay? You've effectively set the bar low and lost yourself money.
posted by inturnaround at 11:15 AM on April 20, 2011 [1 favorite]
Best answer: The answers speak to the variables involved. It depends on the level of information available to both parties, as well as their relative stake in seeing a completed deal.
If you know the value, and are buying, you want to go last (if you are willing to walk away or pay up to the value to know it to be). If you know the value and are selling, going first lets you create the anchoring.
If you don't know the value, and are, say, negotiating salary, going last lets you get more information to counter.
The trick is you don't know how much the other party knows, or worse, what they think they know and may be misinformed on. Knowing as much as you can, and then making a decision on if getting more information is more important than being able to anchor the negotiation is a pivotal decision.
posted by rich at 11:26 AM on April 20, 2011
If you know the value, and are buying, you want to go last (if you are willing to walk away or pay up to the value to know it to be). If you know the value and are selling, going first lets you create the anchoring.
If you don't know the value, and are, say, negotiating salary, going last lets you get more information to counter.
The trick is you don't know how much the other party knows, or worse, what they think they know and may be misinformed on. Knowing as much as you can, and then making a decision on if getting more information is more important than being able to anchor the negotiation is a pivotal decision.
posted by rich at 11:26 AM on April 20, 2011
Everything I read or am told (or see on Pawn Stars) about negotiation says that you want "the other party" to state their number first.
Not so sound snarky, but you might try reading something else. I'd say that any source that give you a hard and fast rule saying "always go first" or "always go last" might not be your best source. Different situations are different - I can't imagine there's any universal rule on this.
Getting to Yes, is, in my opinion, a really great book on the subject - a long-time great-seller, based on work done at the Program on Negotiation at Harvard Law School. Here's what that book has to say on this subject:
Who should make the first offer?
It would be a mistake to assume that making an offer is always the best way to put a figure on the table. Usually you will want to explore interests,options, and criteria for a while before making an offer. Making an offer too soon can make the other side feel railroaded. Once both sides have a sense of the problem, an offer that makes an effort to reconcile the interests and standards that have been advanced is more likely to be received as a constructive step forward.
Whether or not you make an offer, you may want to try to "anchor" the discussion early around an approach or standard favorable to you. On the other hand, if you are ill-prepared and have no idea what would be reasonable, you will probably be reluctant to put an idea or an offer on the table, perhaps hoping that the other side will go first and offer something generous. But you should be careful. It is extremely risky to measure the value of an item by the other side's first proposal or figure. If you know that little about an item's value, you should probably engage in more research before starting the negotiation.
The better prepared both parties are in a negotiation over price, the less difference it makes who makes the first offer. Rather than learning rules about who should make the first offer, it would be better to learn the rule of being well prepared with external measures of value.
(While it's not exactly what the OP asked: If you have q's about negotiation, I'd seriously suggest you check out this book. It's a quick, easy read, with lots of good advice).
posted by ManInSuit at 11:53 AM on April 20, 2011 [1 favorite]
Not so sound snarky, but you might try reading something else. I'd say that any source that give you a hard and fast rule saying "always go first" or "always go last" might not be your best source. Different situations are different - I can't imagine there's any universal rule on this.
Getting to Yes, is, in my opinion, a really great book on the subject - a long-time great-seller, based on work done at the Program on Negotiation at Harvard Law School. Here's what that book has to say on this subject:
Who should make the first offer?
It would be a mistake to assume that making an offer is always the best way to put a figure on the table. Usually you will want to explore interests,options, and criteria for a while before making an offer. Making an offer too soon can make the other side feel railroaded. Once both sides have a sense of the problem, an offer that makes an effort to reconcile the interests and standards that have been advanced is more likely to be received as a constructive step forward.
Whether or not you make an offer, you may want to try to "anchor" the discussion early around an approach or standard favorable to you. On the other hand, if you are ill-prepared and have no idea what would be reasonable, you will probably be reluctant to put an idea or an offer on the table, perhaps hoping that the other side will go first and offer something generous. But you should be careful. It is extremely risky to measure the value of an item by the other side's first proposal or figure. If you know that little about an item's value, you should probably engage in more research before starting the negotiation.
The better prepared both parties are in a negotiation over price, the less difference it makes who makes the first offer. Rather than learning rules about who should make the first offer, it would be better to learn the rule of being well prepared with external measures of value.
(While it's not exactly what the OP asked: If you have q's about negotiation, I'd seriously suggest you check out this book. It's a quick, easy read, with lots of good advice).
posted by ManInSuit at 11:53 AM on April 20, 2011 [1 favorite]
Best answer: It really isn't who goes first or last that matters. What is critical is your level of information, both about how much is really out there on the table, and also about how motivated the other party is.
I find it helpful to think of a negotiation as a table with two sides, each of which has a high opaque barrier. You can imagine a series of lines like the yard markers on a football field on the table. Each side knows how far down the length of the table they are willing to go, and how much they want to make a deal. But the goal is go as small a distance as possible while still getting to a point where a deal can be made. For example, maybe you'd be willing to pay as much as $25,000 for a car. But your goal is to pay as little as possible, yet make an offer sufficient to secure the car at a price the dealer will accept. Clearly, before you make your offer you want as much information as you can get on what price range the dealer is likely to accept, and how motivated the dealer is to sell. One helpful source of information is the dealer's prior offers (e.g. the sticker price) and that's one advantage of having the other side go first -- more information.
You also need to be aware that negotiations only can move in a forward direction. I sometimes meet people who make an offer, then want to retract it and make a lower one. That never works. It just destroys the negotiations. Successful negotiations move toward the range where the parties' willingness to make a deal overlaps, and settle somewhere within that range. They never move backward.
So, the question isn't who makes the first move, but how to find out where the range of acceptable resolution is for the other side, and make an offer or series of offers that moves the final resolution as close to your side of the table as possible.
posted by bearwife at 2:03 PM on April 20, 2011 [1 favorite]
I find it helpful to think of a negotiation as a table with two sides, each of which has a high opaque barrier. You can imagine a series of lines like the yard markers on a football field on the table. Each side knows how far down the length of the table they are willing to go, and how much they want to make a deal. But the goal is go as small a distance as possible while still getting to a point where a deal can be made. For example, maybe you'd be willing to pay as much as $25,000 for a car. But your goal is to pay as little as possible, yet make an offer sufficient to secure the car at a price the dealer will accept. Clearly, before you make your offer you want as much information as you can get on what price range the dealer is likely to accept, and how motivated the dealer is to sell. One helpful source of information is the dealer's prior offers (e.g. the sticker price) and that's one advantage of having the other side go first -- more information.
You also need to be aware that negotiations only can move in a forward direction. I sometimes meet people who make an offer, then want to retract it and make a lower one. That never works. It just destroys the negotiations. Successful negotiations move toward the range where the parties' willingness to make a deal overlaps, and settle somewhere within that range. They never move backward.
So, the question isn't who makes the first move, but how to find out where the range of acceptable resolution is for the other side, and make an offer or series of offers that moves the final resolution as close to your side of the table as possible.
posted by bearwife at 2:03 PM on April 20, 2011 [1 favorite]
If there is one cardinal rule that’s close to universal, you’re not truly negotiating in your best interests if you are unwilling to walk away. There a certainly instances where that is not an option, but I believe 90% of the time it holds true.
posted by PaulBGoode at 3:22 PM on April 20, 2011
posted by PaulBGoode at 3:22 PM on April 20, 2011
Best answer: Yeah, anchoring. The first to name a number is in a weaker position. Not a losing position, but a weaker one compared to the side that has not disclosed.
Better is to negotiate on values. What do you really want? What do I really want? Establish those parameters and then negotiate.
posted by Short Attention Sp at 5:26 PM on April 20, 2011
Better is to negotiate on values. What do you really want? What do I really want? Establish those parameters and then negotiate.
posted by Short Attention Sp at 5:26 PM on April 20, 2011
I second "Getting to Yes." In an ideal negotiation, the ultimate goal is to reach a compromise where both parties had equivalent information and reach a mutually beneficial agreement in which their highest priorities were met. This kind of negotiation is what companies do during mergers and what goes on at Camp David and such. You want this kind of negotiation if you want to maintain a positive relationship afterward.
The kind of negotiation where someone needs to put up a low/highball offer and then things go back and forth until you either meet in the middle, or until someone flinches, is pretty much a game. And just like a game, you can use strategy and tactics to influence the outcome in your favor, but it might come at the cost of the relationship.
posted by krippledkonscious at 5:54 PM on April 20, 2011
The kind of negotiation where someone needs to put up a low/highball offer and then things go back and forth until you either meet in the middle, or until someone flinches, is pretty much a game. And just like a game, you can use strategy and tactics to influence the outcome in your favor, but it might come at the cost of the relationship.
posted by krippledkonscious at 5:54 PM on April 20, 2011
Best answer: I would say that it's not necessarily one or the other. It depends on how much information you have and whether the item you are bargaining for has a distinct value. For example, when you are selling a used car or negotiating a salary, if you have clear information about the number you want (ie: research on car values/salaries) then it's to your benefit to set the stage by giving a number that's higher than what you want. This is because the other party has little justification for (and will feel silly) making an offer that is much lower than yours. Of course, your offer has to be within reason.
However, if you are uninformed or if the good in question doesn't have a particular value (like art or peace treaties, for example), your first offer may be way low, which may lead to them accepting it, and you getting screwed; or way high, which will tip them off that you have no idea what you're talking about.
On another note, it always feels better to be the one to accept an offer or counter-offer than to have your offer or counter-offer accepted. This happened to me recently, when I sold my car; we were negotiating a bit, and I said I couldn't accept less than $x. When the buyer agreed, I was left wondering if I could have pushed it a little further...
posted by Simon Barclay at 6:06 PM on April 20, 2011 [1 favorite]
However, if you are uninformed or if the good in question doesn't have a particular value (like art or peace treaties, for example), your first offer may be way low, which may lead to them accepting it, and you getting screwed; or way high, which will tip them off that you have no idea what you're talking about.
On another note, it always feels better to be the one to accept an offer or counter-offer than to have your offer or counter-offer accepted. This happened to me recently, when I sold my car; we were negotiating a bit, and I said I couldn't accept less than $x. When the buyer agreed, I was left wondering if I could have pushed it a little further...
posted by Simon Barclay at 6:06 PM on April 20, 2011 [1 favorite]
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Anchoring research helps clarify the question of whether to make the first offer in a negotiation: by making the first offer, you will anchor the negotiation in your favor. In fact, Mussweiler and I have shown that making the first offer affords a bargaining advantage. In our studies, we found that the final outcome of a negotiation is affected by whether the buyer or the seller makes the first offer. Specifically, when a seller makes the first offer, the final settlement price tends to be higher than when the buyer makes the first offer.
posted by true at 11:14 AM on April 20, 2011